Quarterly earnings numbers are out for many publicly traded solar manufacturing companies, and you’d be forgiven for thinking the solar industry is in trouble. Why? Because the global price of solar panels is falling, putting pressure on profit margins, and that spells bad news for manufacturers’ earnings.
This is a reminder that what is good for a market isn’t necessarily good for all market participants. Declining prices mean only those with the lowest manufacturing costs (and business models that work on much thinner margins) will earn the profits necessary to survive. Those that can’t will fall by the wayside.
The recent news that Solyndra, a California-based solar tech firm that had received a $535 million federal loan, is laying off 1,100 workers and filing for bankruptcy is a case in point. Solyndra had a compelling technology when solar modules cost $3.25/watt. But the technology didn’t prove out in a world where costs are rapidly approaching $1/watt. This is the Darwinian process by which markets reward innovation and starve stagnation. And it is this process that will ultimately deliver cost-effective solutions to climate change.
A 70-percent decline in solar panel prices over the last 24 months has many in the industry forecasting a brutal shakeout ahead. I’d argue that this picture misses an important point. It’s myopic to focus solely on earnings of one segment of the industry. There’s a silver lining for the world in declining solar prices: cheaper solar power.
The less solar power costs, the more favorably it compares to conventional power, and the more attractive it becomes to utilities and energy users around the globe. Utility-scale solar power can now be delivered in California at prices well below $100/MWh ($0.10/kWh) less than most other peak generators, even those running on low-cost natural gas. Lower solar module costs also stimulate demand from consumer markets where the cost of solar compares very favorably to retail electric rates.
Bottom line: declining prices mean ever-growing demand for solar power. That means an ever bigger role for solar in our generating mix and an increasing impact addressing climate change.
Many may see today’s hand-wringing about solar stocks as an indication we need to go back to past policies of rich direct subsidies for solar. The reality is “the way things used to be” isn’t a viable option. Government appetite for direct solar subsidies is waning and the industry must make the transition to electricity market demand.
That’s not necessarily a bad thing. Just as there’s a silver lining to declining module prices, there’s also an important upside to the broader changes happening in our industry: the companies that emerge successfully from our shifting subsidy landscape will be the very companies that help usher us into an era of grid parity, where solar competes on equal footing with gas, coal, and other traditional power sources.
But that’s only if we play our cards right, both as an industry and as a nation. As I’ve written before, changes to key policies — specifically, those that impact how projects are financed — are critical to developing a strong and competitive solar PV market. Ultimately, the leaders that overcome today’s crisis will be those that can tap the full potential of competitive demand, capturing massive scale as solar becomes a part of the mainstream energy supply.
Go Further
Animals
- Octopuses have a lot of secrets. Can you guess 8 of them?
- Animals
- Feature
Octopuses have a lot of secrets. Can you guess 8 of them? - This biologist and her rescue dog help protect bears in the AndesThis biologist and her rescue dog help protect bears in the Andes
- An octopus invited this writer into her tank—and her secret worldAn octopus invited this writer into her tank—and her secret world
- Peace-loving bonobos are more aggressive than we thoughtPeace-loving bonobos are more aggressive than we thought
Environment
- This ancient society tried to stop El Niño—with child sacrificeThis ancient society tried to stop El Niño—with child sacrifice
- U.S. plans to clean its drinking water. What does that mean?U.S. plans to clean its drinking water. What does that mean?
- Food systems: supporting the triangle of food security, Video Story
- Paid Content
Food systems: supporting the triangle of food security - Will we ever solve the mystery of the Mima mounds?Will we ever solve the mystery of the Mima mounds?
- Are synthetic diamonds really better for the planet?Are synthetic diamonds really better for the planet?
- This year's cherry blossom peak bloom was a warning signThis year's cherry blossom peak bloom was a warning sign
History & Culture
- Strange clues in a Maya temple reveal a fiery political dramaStrange clues in a Maya temple reveal a fiery political drama
- How technology is revealing secrets in these ancient scrollsHow technology is revealing secrets in these ancient scrolls
- Pilgrimages aren’t just spiritual anymore. They’re a workout.Pilgrimages aren’t just spiritual anymore. They’re a workout.
- This ancient society tried to stop El Niño—with child sacrificeThis ancient society tried to stop El Niño—with child sacrifice
- This ancient cure was just revived in a lab. Does it work?This ancient cure was just revived in a lab. Does it work?
- See how ancient Indigenous artists left their markSee how ancient Indigenous artists left their mark
Science
- Jupiter’s volcanic moon Io has been erupting for billions of yearsJupiter’s volcanic moon Io has been erupting for billions of years
- This 80-foot-long sea monster was the killer whale of its timeThis 80-foot-long sea monster was the killer whale of its time
- Every 80 years, this star appears in the sky—and it’s almost timeEvery 80 years, this star appears in the sky—and it’s almost time
- How do you create your own ‘Blue Zone’? Here are 6 tipsHow do you create your own ‘Blue Zone’? Here are 6 tips
- Why outdoor adventure is important for women as they ageWhy outdoor adventure is important for women as they age
Travel
- This town is the Alps' first European Capital of CultureThis town is the Alps' first European Capital of Culture
- This royal city lies in the shadow of Kuala LumpurThis royal city lies in the shadow of Kuala Lumpur
- This author tells the story of crypto-trading Mongolian nomadsThis author tells the story of crypto-trading Mongolian nomads
- Slow-roasted meats and fluffy dumplings in the Czech capitalSlow-roasted meats and fluffy dumplings in the Czech capital